More Homes Built Faster Act,2022 pt.2 Further to our 8 November article on this topic, the More Homes Built Faster Act (Bill 23) received Royal Assent on to 28 November 2022 and is now largely in force. It is intended to increase housing supply and affordable housing options for Ontarians by getting 1.5 million homes built over the next 10 years. It boldly does so in a number of very significant and controversial ways. The highlights of the approved form of Bill 23 include: Development Charges Act, 1997 Bill 23 creates a number of new exemptions from development charges as follows: the greater of 1 residential unit or 1% of existing residential units in a building containing 4+ residential units; up to 3 residential units in a new detached house, semi-detached house or rowhouse; non-profit housing development; and residential affordable housing pursuant to a development approved by way of a zoning by-law (after 28 November 2022); and residential units intended to be affordable or attainable for a period of 25 years or more (on a date to be proclaimed) Under section 5 of that Act the amount of development charges are now reduced on a sliding scale from 80% to 95% from the charges imposed pursuant to a by-law passed on or after January 1, 2022 (unless the DC is payable immediately prior to 28 November 2022). Development charges for rental housing projects are reduced by 25% for premises with three or more bedrooms, 20% for two bedroom units, and 15% for all other residential units. Commencing on 1 January 2023 municipalities are now required to spend and/or allocate each year at least 60% of the monies in reserve funds for water supply services, including distribution and treatment of services, waste water services, and treatment and services related to highways. A development charge by-law now expires every 10 as opposed to every 5 years. The Planning Act The most significant changes to the Planning Act will limit/extinguish the appeal rights of third-parties, including upper tier municipalities now characterised as upper tier municipalities without planning responsibilities (the GTA Regions of Durham, Halton, Niagara, Peel, Waterloo, York and Simcoe) and conservation authorities (date to be implemented TBD). For minor variances and consents the Act will restrict a right of appeal to applicants, public bodies and “specified persons” (public utilities, operators of railway lines, and telecommunications providers). This will increase the significance of local Committees of Adjustment as they may now be the only opportunity to oppose a project. Importantly this provision has retroactive effect and will nullify appeals where a hearing on the merits has not been scheduled before October 25, 2022. Upper Tier municipalities without planning responsibilities will cease to become approval authorities for local planning instruments. Bill 23 contains other consequential changes including: deleting the prohibition on making requests for official plan and zoning by-law amendments for the 2 year period following their coming into effect; allowing the Minister of Municipal Affairs and Housing to make amendments to official plans where the Minister is off the opinion that a plan will adversely affect a matter of provincial interest; allowing up to three residential units in a house to be permitted “as of right” (including placing restrictions on parking requirements); reducing the section 37 community benefit further by making the prescribed percentage of value (4%) subject to a ratio recognizing the existing floor area. This ratio will be further reduced where the formula takes into account affordable/attainable units (date to be implemented TBD); exempting from site plan control (section 41): A. residential development of up to 10 units and a land lease community home from site plan control; and B. exterior design as an element to be considered in site plan drawings. It will be interesting to see what effect this has on urban design guidelines; revising section 42, parkland dedication, requirements by: A. with respect to the dedication of land/cash-in-lieu of 5% (residential rate): decreasing that requirement by the percentage of affordable/attainable units (on a date to be proclaimed); and exempting up to 3 residential units and non-profit housing; B. with respect to the alternate rate (unless a building permit has been issued): changing the rate from 300 units/ha to 600 units/ha; restricting the calculation further to: if 5 ha or less of land, 10% of the land or the value of the land; if more than 5 ha 15% of the land or land value; excluding from the calculation: the number of existing units; and affordable/attainable units from the calculation of net residential units (date to be implemented TBD); C. permitting land owners to propose the conveyance of portions of their land, including encumbered lands, for parkland purposes as opposed to having to rely on the determination of the local municipality (date to be implemented TBD); and D. requiring municipalities to allocate at least 60% of monies collected for parkland purposes at the beginning of each year (1 January 2023). amending section 51 by removing the requirement for a public meeting on subdivision applications. Conservation Authorities Act The Conservation Authorities Act is amended to greatly reduce the ability of Conservation Authorities to regulate development activity by removing their ability to comment on development applications and to require permits for projects approved under the Planning Act. Moreover the Minister will have greater powers to make exceptions for development applications. (date to be implemented TBD). “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” By Fauzan SiddiquiBlog, Real EstateDecember 9, 2022May 16, 2023
What Happens To The Deposit When A Real Estate Transaction Doesn’t Close? It is routine in real estate transactions for a buyer to provide a deposit to the seller as a ‘guarantee’, serving to incentivize the completion of the sale. But what happens to a deposit if the sale falls through, further, what if it is not the buyer’s fault for the sale failing to be completed? In the event, an agreement of purchase and sale is “repudiated”–meaning one party chooses not to fulfill their obligations under the contract–the determination of who is entitled to receive the deposit will usually depend on which party is at fault. If Buyer is at Fault: Deposits typically are provided as security for the buyer’s performance of a contract, thus where a sale has fallen through and the buyer is at fault, the seller is presumptively entitled to keep the deposit as compensation for their lost opportunity. In Azzarello v. Shawqi the Ontario Court of Appeal stated “[it] is well-established by case law that when a purchaser repudiates the agreement and fails to close the transaction, the deposit is forfeited, without proof of any damage suffered by the vendor”.[1] Even if an agreement does not explicitly state what is to happen to the deposit if the transaction fails, the law will presume that the deposit is forfeited by the at-fault buyer unless there is a basis to rebut this presumption. If Seller is at Fault: As is provided in most standard agreements of purchase and sale, where a seller is at fault for a transaction not closing, the buyer will be entitled to have their deposit returned to them absent exceptional circumstances. In Kalis v. Pepper, the Ontario Superior Court was tasked with determining which party in a failed home purchase was entitled to keep the deposit. Ultimately, the deposit was returned to the buyer due to a lack of clear evidence that the buyer has repudiated the agreement.[2] Exceptions to the Presumptive Rule: While the above assumptions apply when determining who gets to keep a deposit in a failed real estate transaction, the default outcome may be overridden in some circumstances. If parties have specifically negotiated an alternative outcome for what will happen to the deposit in the event of a breach, and it is reflected in their agreement of purchase and sale, then courts will often respect that clause. Additionally, the courts have the discretion to displace the presumption that the non-breaching party will be entitled to the deposit. Section 98 of The Courts of Justice Act provides “[a] court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise are considered just”.[3] The court has exercised this discretion in circumstances where the amount of the deposit is disproportionately larger than the harm suffered as a result of the transaction failing, or in instances of unconscionability (where the agreement is the result of substantial unfairness and inequality of bargaining power).[4] For example, in Lucas et al v 1858793 ON the court ruled that the buyer did not have to forfeit its $90,000 deposit on the purchase of a condo unit because that amount was “grossly disproportionate to the harm if any, that the [seller] suffered”.[5] Further, the Application judge felt the seller had only used the breach of the contract (allowing a friend to live in the unit for free – which the seller claimed was leasing the unit without their consent, contrary to their agreement) as an excuse to terminate the agreement before closing and keep the deposit. Determining which party is “at fault” depends on the facts of each transaction and the steps taken by the parties leading up to closing. If you’re having a dispute over a deposit on a purchase, or if you were involved in a failed real estate transaction, please contact Graeme Oddy at (416) 446-5810 or Graeme.Oddy@devrylaw.ca for more information. This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs. This blog was co-authored by Chloe Carr* [1] Azzarello v Shawqi, 2019 ONCA 820 at para 45. [2] Kalis v Pepper, 2015 ONSC 453 at paras 13-14. [3] Courts of Justice Act, RSO 1990, c C 43, s98. [4] Uber v Heller, 2020 SCC 16. [5] Lucas et al v 1858793 Ontario Inc. o/a Howard Park et al, 2020 ONSC 964 at para 55. By Fauzan SiddiquiBlog, Commercial Litigation, Real EstateJune 23, 2022June 10, 2023
Get A Tax Refund On Your New or Substantially Renovated Home If you bought a new or substantially renovated home, you may be entitled to a tax refund. As a consumer, you pay 13% Harmonized Sales Tax (HST) on most goods and services in Ontario. HST is a hybrid sales tax consisting of both federal and provincial sales taxes. As of June 2010, HST is now also payable on all new home sales in Ontario. However, you may be entitled to a rebate. Am I eligible? You may be eligible if you bought, built, or substantially renovated an existing house. This could include residential condominium units, duplexes, mobile or modular homes, or floating homes. You may also be eligible if you built a major addition, or if you converted a non-residential property for residential use. You may also be eligible if you bought a share of the capital stock of a co-operative housing corporation (co-op). You may not need to live in this home yourself. You may be eligible if the home is to be occupied by a relation—however, there are particular rules about who qualifies. You are likely not eligible if you are in the business of manufacturing or reselling homes, or if you are a corporation or partnership. How much is the refund? The federal component of the HST rebate is available in every province. Certain provinces—including Ontario—also offer a rebate on the provincial component of the HST. The amount of your refund will vary based on the province in which you live, and the fair market value of your home. In Ontario, where the fair market value of your home falls within the following brackets, you may be entitled to the following rebate: Below $350,000: the potential rebate is 36% of the federal tax, and 75% of the provincial tax.From $350,001 to $449,999: the potential rebate is up to 35.9% of the federal tax on a sliding scale, and up to 75% of the provincial tax to a maximum of $24,000.$450,000 and above: the potential rebate is $24,000. Is there a deadline? Yes! You have two years to apply. The date upon which the clock starts ticking depends on the nature of your situation, and the circumstances of your purchase or renovation. Double-check the rules and do not miss your chance to apply for your refund. How do I apply? For complete instructions, review the official Guide from the Canada Revenue Agency (CRA) on the GST/HST New Housing Rebate. (You can also download it in PDF). There are two separate rebates for the federal and provincial components. If you live in Ontario, be sure to apply for both rebates. For the federal rebate, complete either Form GST191 or Form GST191-WS, depending on your situation.For the Ontario rebate, complete Form RC7191-ON. Due to the COVID pandemic, it is possible that the CRA will be evaluating rebate applications with greater scrutiny. Be certain that you follow the rules and regulations in your application to ensure that you have the greatest chance of successfully claiming your rebate. For more information, assistance, or any other questions regarding new home purchases, renovations, or other real estate transactions, please contact our real estate lawyers today. Do not delay. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real Estate, TaxAugust 20, 2021August 21, 2021
Understanding Title Insurance In Ontario The title of a property is used to define the right of ownership to the land. In purchasing a home, the title of the property is transferred to the new owner or owners. The insurance related to this protects residential or commercial property owners and lenders from losses related to the title or ownership of the property. Although the province of Ontario states that title insurance is optional, if you have purchased a home or commercial property in Ontario, it was most likely communicated to you that title insurance needs to be purchased as it is a requirement for any mortgage lender. There are two types of title insurance policies: The first is the Owner’s policy which protects the property owner from certain title-related losses typically listed in the insurance policy. The second is the Lender’s policy covering the Lender from losses that occur if the mortgage is invalid or unenforceable. What does Title Insurance Cover? The title insurance policy you purchase will be in place for as long as you hold possession of the property. As with most insurance policies, they are in place to provide the purchaser coverage to protect from potential losses. A Residential Title insurance policy could provide coverage against losses from: Unknown title defects (title issues that prevent you from having clear ownership of the property); Existing liens against the property’s title (e.g., the previous owner had unpaid debts from utilities, mortgages, property taxes, or condominium charges secured against the property); Encroachment issues (e.g., a structure on your property needs to be removed because it is on your neighbor’s property); Title fraud; Errors in surveys and public records; It is also essential to also consider what Title Insurance does not cover, which could include: Known title defects (that were revealed to you before you purchased your property); Environmental hazards (e.g., soil contamination); Native land claims; Problems that would only be discovered by a new survey or inspection of your property (e.g., the property is smaller than initially thought); Matters that are not listed in public records (e.g., unrecorded liens and encroachments); and Zoning bylaw violations from changes, renovations, or additions to your property or land that you are responsible for creating. It will also not provide compensation for issues that are not related to home warranty or home insurance. Issues such as: Damages due to flooding, fire, or sewer backup; General wear and tear of your home (e.g., replacing old windows, a leaky roof, or an old furnace); Theft (e.g., a burglar breaks into your home and steals your television); and Other losses or damages due to nontitle related issues. Benefits of Title Insurance The benefits of title insurance will allow property owners comprehensive coverage for a one-time cost usually due during purchase closings or refinances. Not only will this allow for peace of mind for the purchasers, but you can be sure that if any defects affect the title of your home, these will be covered by your title insurance policy, and your problem could be easily corrected, which lends peace of mind to the purchasers. If you are looking to order title insurance, Stewart Title and First Canadian are well-known Title Insurers. You can speak to a lawyer on how to proceed with the following steps. If you have any further questions on Title Insurance or would like to speak to someone about your Title Insurance for your residential or commercial property, please contact Devry Smith Frank LLP Lawyer Corrine Joseph at Corrine.Joseph@devrylaw.ca Or call her at 289-638-3181 for assistance with this matter. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see or speak to a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJuly 16, 2021January 10, 2024
How Section 116 of the Income Tax Act Can Affect Your Real Estate Transaction Overview When real property is sold by a non-resident of Canada, both the buyer and seller and their advisors should turn their minds to the provisions of section 116 of the Income Tax Act (the “ITA”). These provisions impose obligations and liability on both the buyer and seller, which should be addressed well before the date that the transaction is scheduled to close. In brief, section 116 of the ITA provides that a non-resident seller may notify the Canada Revenue Agency (CRA) of a proposed disposition of property, such notice setting out, among other things, the estimated amount of sale proceeds to be received, as well as the adjusted cost base of the property. This notice must be given using form T2062, “Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property”. If the non-resident has not given such notice to CRA prior to the completion of the transaction (or if the notice was given but the details surrounding the transaction have since changed), the non-resident must notify CRA of the disposition no later than 10 days after closing. In the event that the non-resident seller fails to do so, the seller may have to pay a penalty of up to $2,500, even if the sale of the property does not result in any tax owing. Once CRA has received the non-resident seller’s notice and processed the request for a Certificate of Compliance, CRA will advise the seller of the amount of tax required to be paid and will issue the Certificate of Compliance upon receipt of payment. If no Certificate of Compliance has been issued, section 116 provides that the buyer will be liable to pay 25% (or 50% in some cases) of the purchase price to CRA on behalf of the seller, within 30 days after the end of the month in which the property is acquired (“Remittance Deadline”). The buyer will be entitled to withhold this amount from the purchase price for the purposes of remitting this payment. The Ontario Real Estate Association (OREA) standard form Agreement of Purchase and Sale, used in most residential real estate transactions in Ontario, contains a “residency” clause that is intended to address the requirements of section 116 of the ITA. The Holdback In most cases, the Certificate of Compliance will be issued by CRA after the transaction has been completed, as the tax is normally paid out of the proceeds of the sale. This means that the buyer’s lawyer will have to withhold 25% of the purchase price (or 50% for certain types of property) in trust (the “Holdback Amount”). As the Certificate of Compliance may not be available prior to the Remittance Deadline, the non-resident seller may request a ‘comfort letter’ from CRA which will allow the buyer’s lawyer to continue withholding the Holdback Amount in trust beyond the Remittance Deadline, until otherwise instructed by CRA. Once CRA has advised both parties of the amount of tax payable, the tax can then be paid from the Holdback Amount, and upon the issuance of a Certificate of Compliance, the balance of the funds can then be released to the seller. Accordingly, by applying for a Certificate of Compliance well in advance of the closing date and requesting a comfort letter, the seller may be able to avoid a situation where the entire Holdback Amount is remitted to CRA by the buyer, and avoid having to wait until the seller’s tax returns are filed in order to reconcile this amount with the tax payable as a result of the sale. Buyer’s Liability and “Reasonable Inquiry” into the Seller’s Residence Status If the buyer could have or should have known that the seller is a non-resident, or did not take reasonable steps to investigate the seller’s residence status, the buyer may be liable under section 116. The buyer will not be liable, however, if, after making reasonable inquiry, the buyer had no reason to believe that the non-resident person was not resident in Canada. In a typical purchase and sale transaction, a buyer relies on a statutory declaration made by the seller that the seller is not a non-resident of Canada for the purposes of section 116 of the ITA. In certain circumstances, this declaration may not be available, making it challenging for the buyer to ensure that they are not exposed to liability under section 116. Where a property is being sold by a mortgagee under the power of sale, for example, the registered owner of the property is generally not involved or is uncooperative, and the mortgagee will likely not make any representations or warranties in the agreement of purchase and sale with respect to residency. It is then up to the buyer to make ‘reasonable inquiry’ of the seller’s residence status. What constitutes ‘reasonable inquiry’ is highly circumstantial. In Kau v The Queen, 2018 TCC 156, the buyer of a condominium unit in Toronto was held liable for over $90,000 of tax under section 116 after the Tax Court of Canada determined that he failed to make reasonable inquiry as to whether the seller, who lived primarily in California, was a non-resident. This was despite the fact that the buyer’s lawyer had received a signed but unsworn statement from the seller, in which the seller stated that he was “not a non-resident of Canada within the meaning of section 116 of the Income Tax Act (Canada) and nor will [he] be a non-resident of Canada at the time of closing.” The Court held that this unsworn statement was insufficient to satisfy the purchaser’s obligation to make a reasonable inquiry. The court further held that what is reasonable will be fact-specific. In Kau, the purchaser was aware that the seller owned the unit as an investment property and should have noticed that the seller had an address for service in California. Therefore, in those circumstances, the purchaser should have required more than an unsworn statement to confirm that the seller was not a non-resident. The court noted that the outcome would likely have been different had the seller made such a statement in a solemn declaration or under oath. When the residence status of the seller is unclear, and no assurances are provided by or on behalf of the seller, a prudent buyer may try to err on the side of caution by withholding 25% of the purchase price and remitting the funds to CRA. However, section 116 only entitles the buyer to withhold funds if the seller is in fact a non-resident, and not simply because the buyer has not been able to confirm the seller’s residence status. In these circumstances, it is important for buyers to seek legal advice to ensure that their obligations under section 116 are adequately addressed prior to entering into a binding Agreement of Purchase and Sale. There are some exceptions to the above, and how section 116 of the ITA applies will vary depending on the type of property being disposed of and the circumstances surrounding the transaction. The buyer and seller should consult with their respective lawyers regarding their particular transaction. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please contact a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real Estate, TaxNovember 27, 2020March 20, 2024
Involved in a Commercial Real Estate Transaction? Make Sure You Complete Your Due Diligence with Respect to Environmental Issues Due diligence is an essential part of any real estate transaction. In a residential real estate transaction, searches are typically performed to determine if there are any issues with respect to title, encroachments, work orders, open building permits, arrears in taxes or utility bills, and writs against the seller. Of course, every property is unique and additional searches may be required depending on the particular situation. In a commercial real estate transaction, it is important to conduct searches for not only the above-mentioned issues but also for additional matters that can especially affect commercial properties. Failure to conduct proper due diligence can expose the purchaser to significant liability. In today’s post, we will focus on liability for environmental issues and how you, as a purchaser of a commercial property, can take steps to protect yourself.Environmental LiabilityUnder Ontario’s Environmental Protection Act, RSO 1990, c E.19, current and former owners of a property can be held liable for environmental contamination, whether or not they are actually responsible for causing the contamination. In Hamilton Beach Brands Canada Inc v Ontario (Environment and Climate Change), 2018 ONSC 5010 (Div Ct) (leave to appeal to ONCA denied), the current owners and tenants of property were held liable for contamination that occurred at the hands of a former tenant decades earlier. As seen in the case of Midwest Properties Ltd v Thordarson, 2015 ONCA 819 (leave to appeal to SCC denied), corporate ownership of a property will not necessarily protect individuals from being held personally liable. Courts are willing to pierce the corporate veil and hold directors and officers liable for environmental contamination pertaining to properties owned by their respective corporations. Furthermore, a government order to remediate a property does not preclude a civil action for damages from owners of neighbouring properties that may be affected by the contamination.How Can You Protect Yourself?Before purchasing a commercial property, it is important to thoroughly investigate the history of the property and determine if it is possible that contamination occurred on the property at any time in the past. This may require determining all the previous owners and uses of the property. The Ontario Ministry of the Environment, Conservation and Parks (MECP) should be contacted to determine if there are any records of contamination relating to the property in question. If there are any storage tanks on the property, their history should be investigated. Since 2002, all underground fuel storage tanks must be registered with the Technical Standard Safety Authority, and larger tanks require annual testing. In some cases, it may be necessary to perform a Phase I or even a Phase II Environmental Site Assessment (ESA) to determine if any contamination exists on the property, either above or below the surface or in the groundwater. If there are plans to change the use of a property, the MECP may require that a Record of Site Condition be filed which in turn requires completion of an ESA.If you have any questions regarding liability for environmental contamination or environmental due diligence that should be completed prior to purchasing either a residential or commercial property, please contact Laura Rosati, Commercial Real Estate Lawyer at Devry Smith Frank LLP, at 289-888-6643 or laura.rosati@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateNovember 4, 2020March 20, 2024
Ontario Introduces the Personal Real Estate Corporation (PREC) On October 1, 2020, the Government of Ontario filed Ontario Regulation 536/20, Personal Real Estate Corporations (“Regulation 536/20”), under the Real Estate and Business Brokers Act, 2002, SO 2002, c 30, Schedule C (“REBBA 2002”). Regulation 536/20 allows realtors in Ontario to incorporate Personal Real Estate Corporations (“PRECs”) and establishes the regulatory framework with respect thereto. Realtors now join other professionals, such as medical doctors, lawyers and accountants, who are permitted to earn income through a professional corporation. This post provides an overview of Regulation 536/20 and addresses some of the potential benefits of a PREC to a realtor. Regulation of PRECs Pursuant to Regulation 536/20, a PREC must be incorporated under the Ontario Business Corporations Act, RSO 1990, c B.16. The PREC’s sole director, sole officer and the controlling shareholder must be registered under REBBA 2002, or exempt from registration, and must be employed by a real estate brokerage to trade in real estate. The PREC itself cannot carry on the business of trading in real estate other than by providing the services of its controlling shareholder to the brokerage. The PREC is only permitted to receive remuneration pertaining to trading in real estate from the controlling shareholder’s brokerage. Likewise, the controlling shareholder is only permitted to receive remuneration pertaining to trading in real estate from the PREC or from the brokerage by which the controlling shareholder is employed. Benefits of PRECs If used correctly, a PREC can assist a realtor with tax planning. Instead of all annual income being taxed at the realtor’s personal marginal income tax rate, income retained in a PREC will initially only be taxed at a corporate tax rate. Presently, the combined federal and Ontario personal income tax rate is over 53% on income over $220,000 whereas for Canadian controlled private corporations entitled to take advantage of the small business tax deduction, the current combined federal and Ontario tax rate is only 12.2% on income up to $500,000. Thus there is the potential for considerable deferment of taxes. Retaining earnings in a PREC may allow for personal income to be “averaged” over several years. The real estate industry can be volatile and realtors are usually only paid on commission. As such, a realtor may have a sizeable income one year and less income in the following years. If one year results in particularly high earnings, those earnings can be retained in the PREC and paid out to the realtor over the following years, rather than being paid to the realtor by the brokerage in the year in which they were earned. This may result in the earnings being taxed at lower marginal income tax rates over several years. The realtor also has the option of being paid by the PREC through dividends rather than through wages, which may provide additional tax advantages. The PREC also allows real estate agents the ability to income-split with the realtor’s spouse, child or parent, subject to the more comprehensive rules regarding tax on split income (which are relaxed for persons over age 65). Therefore, it may be possible to pay amounts from the PREC to those family members, who will presumably be taxed at a lower marginal tax rate than the realtor. Is a PREC Right for You? In order to take advantage of the benefits that a PREC can offer, proper planning is essential. A realtor must consider the extra administrative costs associated with incorporating and maintaining a corporation and weigh these costs against the potential benefits of a PREC. To further discuss whether or not a PREC is appropriate for your situation or to learn more about incorporating a PREC, please contact Elisabeth Colson, a partner and the head of Devry Smith Frank, LLP’s Corporate Commercial Group, at 416-446-5048 or at elisabeth.colson@devrylaw.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate Law, Real EstateOctober 28, 2020April 10, 2024
Title Insurance Providers Introduce Increased Protection for Lenders from Super Priority Liens and Deemed Trusts The recent decision of the Federal Court of Appeal in Toronto-Dominion Bank v Canada, 2020 FCA 80 (“TD v Canada”), created a new cause for concern for lenders. The facts of the case are as follows: In 2007 and 2008 the debtor, before becoming a customer of the Toronto-Dominion Bank (“TD”), failed to remit to the Receiver General of Canada over $67,000 worth of GST in relation to his business. In 2010, TD extended a loan and a line of credit to the debtor, both of which were secured against a property owned by the debtor. In 2011 the debtor sold the property in question and repaid the loan and line of credit. TD then discharged all charges registered against the property. Two years later, the Canada Revenue Agency (the “CRA”) commenced a deemed trust claim under Section 222 of the Excise Tax Act, RSC 1985, c E.15 (the “Act”) on the basis that the unremitted GST amounts constituted a deemed trust and the proceeds from the sale of the property should have been paid to the Receiver General before they were paid to anyone else. At trial, the Federal Court (2018 FC 538) held that the unremitted GST amounts were indeed subject to the deemed trust provisions of Section 222 of the Act, and, because the deemed trust existed before TD registered its security interest against the property, the CRA had a super-priority lien on the sale proceeds of the property. TD was therefore obliged to remit the amount of the GST debt to the CRA. The Federal Court of Appeal upheld this decision. Outcome This decision is worrisome to lenders for several reasons. First and foremost, amounts covered by the deemed trust provisions in the Act, as well as other amounts that result in a deemed trust, such as pension deductions that an employer fails to remit under Section 227 of the Income Tax Act, RSC 1985, c1, are not registered on title to a property. Therefore, it is often very difficult to determine if a deemed trust exists at the time a lender seeks to register a security interest against a property. Despite this, if a deemed trust is later found to have existed before a security interest was registered against a debtor’s property, the amount subject to the deemed trust will form a super-priority overpayment made to the lender. This includes payments made from the proceeds of the sale of the secured property. The amounts in question can be significant, and these claims can be brought forward many years after a property has been sold and the security interests discharged. Title Insurance While title insurance has, for some time, offered protection against these types of super-priority claims, there is a caveat. Traditionally, coverage under a lender’s title insurance policy ends once the mortgage to which it applies is discharged and therefore, there was no protection for lenders with respect to super-priority claims made following such discharge. In response to TD v Canada, title insurers have begun to introduce new types of coverage for super-priority claims made up to ten years following the discharge of a mortgage. This coverage, with certain exceptions and limitations, gives lenders peace of mind that they are protected from super-priority claims made against them long after they have discharged their security interests against a property. The new coverage is available for both residential and commercial properties. For more information on title insurance protection for deemed trust amounts and super-priority claims, or on title insurance in general, please contact Justin Cooper, Commercial Real Estate Lawyer at Devry Smith Frank LLP, 416-446-3343, justin.cooper@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateSeptember 30, 2020July 5, 2023
Four things you need to know about “Time shall be of the essence” in real estate transactions (especially in a pandemic!) A contract of sale for a piece of real estate property will almost always expressly provide that time is of the essence. This clause means that you and the other parties in the agreement must be punctual and fulfill their obligations promptly. Otherwise, if you fail to perform in a timely fashion, the contract may end and you may be liable for damages. For example, if you change your mind about purchasing the property or cannot attain suitable funding in time for the closing date, you may be in breach and liable to the other parties. In other words, the deadlines are very important; missing them could cost you. You may need to pay for the other parties. Here are four things you need to know: Proceed diligently and in good faith Stay true to your word, secure funding, fulfil your obligations with diligence. Complete your obligations faithfully and do not interfere with the other party’s ability to fulfil their responsibilities. If you are uncertain about your obligations, obtain legal advice. How to rely on the clause If you want to rely on the clause to accuse another party of failing to live up to their obligations, you must demonstrate that you are ready, willing, and able to complete the agreement. In other words, if both parties are not ready to close on a real estate transaction, neither party can rely on the clause to bring an action for specific performance, damages, or termination of the contract. When the clause is negated By waiver. For example, if both parties agree to extend the closing date by two days then there is a waiver. In general, if one party in a contract takes action(s) to make it clear that the strict contractual provisions will not be enforced, the clause is waived in that instance. By-election: For example, if the buyer does not have the requisite financing completed on the closing date, the seller could agree to extend the closing date. In general, when one party breaches the contract and the other parties’ consent, the clause is negated by-election. How the clause is impacted by the Coronavirus pandemic (COVID-19) COVID-19 has disrupted the economy and caused some aspects of the institutions which help real estate transactions move along have temporarily scaled back or suspended their operations. Further, COVID-19 has caused financial hardships which also have the potential to delay real estate transactions. Delays may cause deadlines to be missed, and you do not want to be on the hook due to a delay caused by COVID-19. To ensure that your real estate deal is not held up by the pandemic, obtain legal advice to ensure you either: enter into agreements properly drafted with COVID-19 in mind, or that your existing agreement completes without delays caused by COVID-19. For more information or any other questions regarding real estate transactions, please contact our real estate lawyers today. Don’t delay, time is of the essence. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, COVID-19, Real EstateAugust 18, 2020June 4, 2021
Questions Your Landlord Should Not Ask You As a tenant you have rights including the right to privacy and the right to notice upon a landlord’s entry into your premise. As a renter, you should be aware that there are questions that a landlord simply cannot ask you, be it once you have occupied the property or in the stages of completing a rental application. Nationality – A landlord cannot discriminate against you based on your nationality, citizenship or anything related to your ethnic background. This question should never be asked. Sexual Orientation – A landlord cannot ask you if you are straight, gay, lesbian, queer bisexual, etc., and they cannot deny you a rental unit based on your gender identity or orientation. Religion – A landlord cannot ask you about your religious affiliation or if you are religious in general. Public Assistance – While a landlord has the right to know if you are employed, they do not have the right to know where all of your money comes from. If you are employed but on public assistance for example, your landlord cannot treat you differently or deny you the unit. Family Status – Though a landlord has the right to ask you how many people will be living in the unit, they cannot ask if you are pregnant or plan to have children in the future. In that same vein, landlords cannot turn applicants away based on their relationship status. Age – Landlords also cannot discriminate against a renter or applicant based on age. This includes people who are 16 or 17 years old and no longer living with their parents. However, note that a landlord is entitled to verify that an applicant is of age to enter into a legally binding contract. For the purposes of housing, age is defined under the Ontario Human Rights Code as 16 years of age or older as long as the applicant has withdrawn from parental control. Physical Disability – A landlord cannot ask you if you have a physical disability. Such disabilities are protected under human rights legislation and can be viewed as a form of discrimination. Mental Disability – Much like a physical disability, a landlord cannot ask you if you have a prior or current mental disability. Such disabilities are also protected under human rights legislation and can be viewed as a form of discrimination. Notice – As mentioned above, landlords must give proper notice before entering the premise. This question cannot merely be asked at the time of entry but must rather be obtained withing 24-hours minimum of the desired entry time. Repairs – Your landlord is responsible for maintaining the appliances in your rental unit. They are not allowed to ask you to make the repairs yourself. Arrest – A landlord may be able to ask you if you have ever been convicted of a crime, but a conviction is much different that an arrest. If you have been arrested in the past but not convicted, there is no obligation to disclose, and the landlord should be refraining from such questions. Pets – Ontario’s Residential Tenancies Act does not permit landlords to include “no pet” clauses in rental agreements and landlords should usually refrain from asking a renter or applicant if they have pets. The only exception is if the rental property is a condominium and the condominium corporation’s declaration, by-laws or rules prohibits pets. Smoking – The Residential Tenancies Act does not address matters relating to individuals before they become tenants, so if a landlord refused to rent to a person on the basis of smoking or insists on a “no smoking” clause, an applicant has no recourse and can be refused tenancy. However, while a landlord may refuse an applicant for smoking, a landlord is not able to amend an existing lease to add such a provision, or legally evict someone once they become a tenant merely because they committed the specific act of smoking in violation of a “no smoking” clause in the rental agreement. If a landlord wants to evict someone for smoking, they have to prove more than just the act. The key to evicting someone for smoking is if the smoke damages the property or infringes on the rights of other tenants. If you have been asked any of the following, your rights under the Residential Tenancies Act may have been violated and you may have standing to bring an application before the Landlord and Tenant Board of Ontario. Contact Robert Adourian at Devry Smith Frank LLP to have your rights assessed and protected. By Fauzan SiddiquiBlog, Real EstateApril 22, 2020September 30, 2020
